U.S. stock index futures were flat during overnight trading Sunday after the Nasdaq Composite Index posted its worst month since 2008, pressured by rising rates, rampant inflation, and underwhelming earnings from some of the largest technology companies.
Futures contracts tied to the Dow Jones Industrial Average slid 11 points. S&P 500 futures were flat, while Nasdaq 100 futures declined 0.2%.
The major averages sank on Friday, accelerating April's losses. The Dow sank 939 points during the session, bringing its loss last week to roughly 2.5%. It was the 30-stock benchmark's fifth-straight negative week.
The S&P 500 declined 3.63% on Friday, its worst day since June 2020, and posted its fourth-straight negative week for the first time since September 2020. The Nasdaq also posted a fourth-straight week of losses, after falling 4.2% on Friday. Both indexes registered their lowest closing levels of the year.
"This has become a classic trader's market as spikes in volatility and increasingly bearish headlines reverberate," said Quincy Krosby, chief equity strategist for LPL Financial.
The Dow and S&P 500 are coming off their worst month since March 2020, when the pandemic took hold. The Dow finished April 4.9% lower, while the S&P tanked 8.8%.
The selling was even more extreme in the tech-heavy Nasdaq Composite, which plunged 13.26% in April, its worst month since October 2008. The steep decline follows underperformance from large tech companies, including Amazon, Netflix and Meta Platforms.
"[D]isappointing guidance from technology giants Amazon and Apple have exacerbated concern that a decidedly more hawkish Fed, coupled with still intractable supply chain issues, and rising energy prices may make the hope of a 'soft landing' from the Fed more elusive," Krosby said.
Netflix is down 49% over the last month, with Amazon and Meta losing 24% and 10.8%, respectively. Tech stocks have been hit especially hard since their often-elevated valuations and promise of future growth begin to look less attractive in a rising-rate environment.
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Investors are looking ahead to Wednesday, when the Federal Open Market Committee will issue a statement on monetary policy. The decision will be released at 2 p.m. ET, with Federal Reserve Chairman Jerome Powell holding a press conference at 2:30 p.m.
"Rising cost pressures and uncertain outlooks from the largest technology names have investors agitated...and investors are not likely to be comfortable any time soon with the Fed widely expected to deliver a 50 basis point hike along with a hawkish message next week," said Charlie Ripley, senior investment strategist for Allianz Investment Management.
Another key economic indicator will come Friday when April's jobs report is released.
Earnings season is now more than halfway finished, but a number of companies are set to post results in the coming week, including a host of consumer-focused restaurant and travel companies.
Expedia, MGM Resorts, Pfizer, Airbnb, Starbucks, Lyft, Marriott, Yum Brands, Uber eBay and TripAdvisor are just some of the names on deck.
Of the 275 S&P 500 companies that have reported earnings so far, 80% have beat earnings estimates with 73% topping revenue expectations, according to data from Refinitiv.
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March, the Fed made a quarter percentage point hike, from near zero. Powell told the International Monetary Fund forum last month, “It is appropriate in my view to be moving a little more quickly. I also think there’s something in the idea of front-end loading whatever accommodation one thinks is appropriate.” Some regarded that comment as a signal of “peak hawkishness” to come.
Don’t fight the Fed, as the saying goes. A person’s real fight, experts say, is understanding their emotions and financial capabilities in this moment — and making the best of it during a volatile stock market not helped by the drumbeat of another possible recession.
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Rising inflation-adjusted yields in the U.S. are undermining the long-running trade in which investors favor stocks over other asset classes, and are poised to hit the technology sector even harder.
That trade — known as “TINA,” an acronym for “There Is No Alternative” to equities — is being increasingly tested by real yields, which have risen from below zero on expectations of aggressively higher interest rates by the Federal Reserve. Five-, 10- and 30-year inflation-adjusted yields are at their highest or least negative levels of roughly the past two years, according to Tradeweb.
Meanwhile, all three major stock indexes have taken huge hits: the S&P 500 index SPX and Dow industrials DJIA just finished their worst April performances since 1970 — down by 8.8% and 4.9%, respectively, for the month. The tech-heavy Nasdaq Composite COMP was down 13.3% in April, its worst showing for that month since 2000.
$Netflix(NFLX)$
Netflix's most jarring number was its loss of 200,000 subscribers for the quarter, the first decline since 2011. This was especially dismal because Netflix had forecast it would have between 2.5 million and 4 million net additions, so investors were blindsided by the drop to 221.64 million worldwide subscribers. It didn't help, either, that Netflix expects the carnage to continue in the second quarter, with a potential loss of as many as 2 million subscribers.
Netflix is still seeing growth in viewing time, according to Nieslen data, as the chart below shows. But with inflation soaring to levels not seen in 40 years, maintaining a subscription is no longer a priority for consumers.
Latest Stock Futures News
Stock futures fell slightly in early morning trade after the Federal Reserve raised rates by half a point and the major averages rallied to end the day.
Futures tied to the Dow Jones Industrial Average lost 41 points, or 0.12%. S&P 500 futures and Nasdaq 100 futures fell 0.22% and 0.33%, respectively.
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Amazon on the likes are trying to rebound.
Stock futures were little changed in overnight trading Tuesday ahead of a key inflation reading.
Futures on the Dow Jones Industrial Average shed about 15 points. S&P 500 futures were marginally lower and Nasdaq 100 futures were near flat.